July 19, 2024


The Intersection of Information and Insight

Lionsgate to spin off studio business in $4.6 billion SPAC deal

2 min read

Lionsgate is spinning off its film and TV studio business — best known for the “Hunger Games,” “Saw” and “John Wick” movie franchises — from pay cable unit Starz.

Santa Monica-based Lionsgate will merge its studio arm with Screaming Eagle Acquisition Corp., a special purpose acquisition company, or SPAC, in a deal that values the assets at $4.6 billion.

Lionsgate will publicly trade its studio business as Lionsgate Studios in an effort to raise new capital. Starz, which will remain in the existing publicly traded Lionsgate company, will not be part of Lionsgate Studios.

Lionsgate said it expects the merger to raise about $350 million in capital, which will be used in part to help fund Lionsgate’s $375 million acquisition of eOne, the film and TV studio behind “Yellowjackets,” which airs on Paramount Global’s Showtime network.

SPACs are publicly traded investment vehicles set up for the specific purpose of acquiring another company. These financial instruments became popular in recent years as a way for companies to go public or spin off without going through the hassle of a traditional initial public offering.

Lionsgate will own about 87.3% of Lionsgate Studios shares, while Screaming Eagle shareholders and investors will own about 12.7%.

“This transaction creates one of the world’s largest publicly-traded pure play content platforms with the ability to deliver significant incremental value to all of our stakeholders,” Lionsgate Chief Executive Jon Feltheimer and Vice Chair Michael Burns said in a joint statement on Friday. “We’ve put together all of the pieces for a thriving standalone content company with a strong financial growth trajectory.”

A spinoff has been in the works for several years. Lionsgate purchased Starz in 2016 in a $4.4-billion deal that was meant to help the company strengthen its business by giving it an in-house cable TV distributor for its programming. But with the decline in linear TV, Lionsgate believed the combination of its studio business with Starz has impacted the valuation of its assets. Starz is known for shows including “Outlander.”

By separating its film and TV business, which has an extensive library of roughly 20,000 titles, Lionsgate could find a buyer for its studio business — a deal that would continue the ongoing merging of Hollywood’s major studios.

The top executives at Warner Bros. Discovery and Paramount Global have engaged in preliminary discussions about potentially merging their companies.

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